Think Progress: Boehner Revives Flawed Study To Defend Tax Cuts For The Wealthy

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(Original Post)

By Travis Waldron on Nov 8, 2012 at 1:45 pm

As the nation races towards the fiscal cliff, Republicans are again attempting to ensure that the high-income portion of the Bush tax cuts are preserved, instead of expiring at the end of the year as scheduled. President Obama, meanwhile, has promised to veto any extension of the tax cuts for the rich.

Multiple studies have shown that the high-income cuts, despite Republican claims, don’t have a substantive effect of job creation or economic development. House Republican leadership is ignoring those studies, though, and is instead pushing a flawed analysis conducted by financial firm Ernst & Young (and backed by the Chamber of Commerce) that claims the expiration of the high-income tax cuts will cost 700,000 jobs.

House Speaker John Boehner (R-OH) cited the study in a Wednesday speech where he drew a line on taxes that sounded similar to the one taken by the party’s failed presidential candidate:

    The independent accounting firm Ernst and Young says going over part of the fiscal cliff and raising tax rates on the top two brackets will cost our economy more than 700,000 jobs.

    Ernst and Young also confirms many of those hit with the rate increase will be small business owners – the very people both parties acknowledge are the key to private sector job creation.

Today, Boehner highlighted the study on Twitter:

    @SpeakerBoehner

    Ernst & Young says POTUS' #smallbiz tax hike will destroy 700K+ jobs. Raising tax rates is a nonstarter j.mp/RiyYiD
    8 Nov 12

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The claim that the expiration of the high-income cuts would have a disproportionate effect on small businesses has already been widely debunked, given that only 3 percent of businesses that file as individuals for tax purposes exceed the $250,000 threshold.

But the study also has major methodological errors, as Citizens for Tax Justice noted in July. The biggest issue is that Ernst & Young assumed the expiration would have a far larger impact on the labor market than do other non-partisan analyses. The study also absurdly assumed that every penny raised by the tax cuts expiring would be spent. As CTJ noted, “While [the study] does not explain any reason for this assumption, the effect of it is to eliminate the possibility that the additional revenue will increase private investment by reducing the deficit’s ‘crowding out’ effect.”

CTJ also pointed out that President Bush’s own Treasury Department found that in the long-term the extension of the high-income cuts would have “essentially no beneficial effect on the U.S. economy at all.”